Question

Mark “T” for true and “F” for false.

1. A perfectly competitive market consists of products that are all slightly different from one another.


2. An oligopolistic market has only a few sellers.


3. The law of demand states that an increase in the price of a good decreases the demand for that good.


4. If apples and oranges are substitutes, an increase in the price of apples will decrease the demand for oranges.


5. If golf clubs and golf balls are complements, an increase in the price of golf clubs will decrease the demand for golf balls.


6. If consumers expect the price of shoes to rise, there will be an increase in the demand for shoes today.


7. The law of supply states that an increase in the price of a good increases the quantity supplied of that good.


8. An increase in the price of steel will shift the supply of cars to the right.


9. When the price of a good is below the equilibrium price, it causes a surplus.


10. The market supply curve is the horizontal summation of the individual supply curves.


11. If there is a shortage of a good, then the price of that good tends to fall.


12. If pencils and paper are complements, an increase in the price of pencils causes the demand for paper to decrease or shift to the left.


13. If Coke and Pepsi are substitutes, an increase in the price of Coke will cause an increase in the equilibrium price and quantity in the market for Pepsi.


14. An advance in the technology employed to manufacture roller blades will result in a decrease in the equilibrium price and an increase in the equilibrium quantity in the market for roller blades .


15. If there is an increase in supply accompanied by a decrease in demand for coffee, then there will be a decrease in both the equilibrium price and quantity in the market for coffee.

Answer 1

1. False

( A perfectly competitive market consists of homogeneous products. )

2. True.

( the word olgo itself stands for few and poly means sellers. )

3. False

( As per the law of demand, other things remaining equal, increase in the price of good leads to a decrease in quantity demanded. )

Note : We can say decrease in demand only if demand decreases at all the prices. There is a difference between increase or decrease in demand and increase or decrease in quantity demanded. A Change demand means a shift in demand curve. A Change in quantity demanded means a movement along the demand curve.

4. False

( substitutes have positive price elasticity of demand. Increase in the price of good leads to an increase in demand for its substitute.)